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Why coaching should be the first step to giving advice

Chris Budd explains the evolution of advice and why the next development should include coaching.

Financial advice has evolved significantly over the years. In the old days there was a very simple process for providing financial advice: fill out a factfind, get the information about the client, go through it, see what gaps there are and then recommend the product to fill the gap.

This is advice, but could also be called selling. That’s not a dirty word. Sometimes selling skills are needed to give people what is best for them, like pensions or life assurance.

Nowadays we’re all familiar with the adoption of the second stage in the process before giving advice, known as planning.

Financial planners ask clients’ objectives, maybe set up a cashflow model to demonstrate how it might be achievable and what assumptions are required. Then they move to advice to recommend the most appropriate products and investments in order to bring that agreed plan to fruition.

But planning is no longer the future and no longer the benchmark of ‘better’ firms; it is the now. The future is in coaching, moving the provision of financial advice into a three-stage process.

Coaching – Planning – Advice. In that order.

Coaching is the use of interpersonal skills in order to help a client better understand themselves.

If a client – and therefore the adviser – gets to understand the motivations and values that go on behind their objectives, then we can perhaps unlock new objectives, maybe even dare clients to dream a little.

Coaching leads to stronger client relationships. It is a great defence to the apparent ‘threat’ of robo-advice. Anyone could create a simplified version of what advice-only advisers offer, but one thing robo-advice will never do, is challenge clients’ assumptions. A coaching-based financial planner will always offer something that clients could not get from any automated service.

But it’s not just about client loyalty and a resilient business model. Clients who have been encouraged to dream and then given the plan to set them on that path will become ambassadors for your services.